According to one analyst, a significant drop in transaction fees on the Ethereum network could signal a bullish trend for ETH.
“Any time ETH gas fees bottom, it usually signals a price bottom in the medium term,” said Ryan Lee, chief analyst at Bitget Research. Lee also suggests that ETH prices tend to recover strongly after such a cycle, and if this coincides with interest rate cuts, the market’s growth potential increases.
Gas fees, the fee users pay to transact on the Ethereum network, recently dropped to as low as 0.6 gwei, with low-priority transactions costing just 1 gwei or less. This represents a significant drop of over 95% from the peak of 83.1 gwei in March, when network activity was increasing.
Lee attributes the drop in fees to a combination of factors, including the shift in demand from the Ethereum blockchain space towards faster and cheaper alternatives like Solana and Layer 2 solutions, as well as the implementation of the Dencun upgrade, which increases network efficiency and lowers transaction costs.
Additionally, the reduced amount of ETH burned due to lower fees has led to an increase in token supply.
Despite the current decline in fees and the resulting increase in ETH supply, Lee’s analysis suggests that historical trends point to a potential recovery in ETH prices in the medium term, especially when coupled with a rate cut cycle.
*This is not investment advice.
